Snake Doctor, and how best to even regulate that? The financial innovations of the past 25 years allow risk to be bought and sold. Are we going to regulate the buying and selling of risk by two interested parties? How about the leverage being built into these products? I wrote "$180 trillion" in derivative contracts above but BIS recently put the figure at $516 trillion most of it in interest rate contracts but $51 trillion in credit derivatives. $51 trillion is more than 4 x the entire US annual GDP.
BIS paper:
http://www.bis.org/publ/otc_hy0711.htm
This amount of leverage is certainly a serious threat.